Kevin Sefton, CEO of untied, the UK’s personal tax app, comments on the high court ruling yesterday that will force Uber to overhaul its business model in London, with private hire taxi operators now having to enter into a contractual obligation with customers:
This case relates to whether a private hire vehicle (PHV) operator such as Uber can simply be an intermediary between the driver and the customer or whether the transport service is fundamentally provided by Uber. The ruling found that Uber, not the driver, is providing the transport to the customer.
Significant VAT impact
As a big company, Uber should be charging VAT on its services – and should have been in the past. This could add up to £1bn or more in back taxes.
What does this mean for customers and drivers?
Uber customers are likely to see prices rise to take account of the VAT. From a driver perspective, demand could possibly fall as a result of these price rises (or they may need to share some of the hit).
Are Uber drivers self-employed?
This case was not about the tax status of the individual drivers as employed or self-employed. Based on just this case, we could argue that drivers could remain self-employed for income tax purposes, with the transport being provided by Uber or equivalent.
Equally, this case was not focussed on employment status (although the Supreme Court case that triggered today’s case was). Once again it raises similar questions:
- What is the status for employment purposes?
- What is the status for tax purposes?
- What is the status for other regulatory - in this case transport– purposes?
- What does this all mean for contract and VAT?
Why is the intermediary business model so attractive?
This is because the UK has a high registration threshold for VAT compared to other countries. Dragging more people into VAT accounting won’t be popular, but platforms will be looking over their shoulders at what other new taxes Whitehall may have in mind.
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For further information:
Chantal Heckford firstname.lastname@example.org